Say Manteca residents buy $50,000 worth of clothes, office supplies, home accessories and such each day from Internet firms such as Wayfair, small independents either directly from the sites or via Amazon, or on other platforms that do not collect sales tax.
They will be saving $4,125 as opposed to buying it directly from Amazon and not a third party or at a brick and mortar location in Manteca.
Whether it is legal for states — and therefore local jurisdictions — to force the collection of sales tax by folks like Wayfair and countless independents when they sell items from out-of-state to consumers in Manteca is now being mulled over by the Supreme Court.
Those opposing as well as supporting imposing universal sales tax collection on Internet retail sales frame it as a fairness issue. The opponents say it will unfairly burden the sellers especially those running Internet retail concerns out of their homes. Supporters say it is unfair to businesses that have to collect the taxes. The State of South Dakota that is behind the case is focused on the intent of sales tax which is to support government services that Wayfair and all of those home-based Internet concerns need to conduct their business as well as provide common services for the general public. Those services run the gamut from police and fire protection to streets, schools, public assistance, courts, and more.
Every day when Manteca residents order items from Internet retail sites that do not collect sales tax, they are taking money away from essential government services such as police. If there was a conservative average of $50,000 a day in non-taxed Internet sales for goods being delivered to Manteca consumers, during the course of a year Manteca would lose $182,500 as its share of the basic sales tax and $91,250 in half cent Measure M public safety tax. Given that 62 percent of all city general fund receipts go to public safety, the basic one cent sales tax the city collects would contribute $113,150 to police and fire. Combine that with the Measure M tax and that comes to $204,400 a year or enough to cover the salaries and benefits of 1 3/4 police officer positions.
Measure K sales tax — the half cent county wide sales tax that helps pay for new freeway lanes, city street maintenance, bus and rail service, as well as playing a pivotal role in addressing the 120 Bypass/Highway 99 safety and congestion debacle — loses $91,250. The state is out $1,585,625 over a year’s time. And that’s based on a low-ball $50,000 a day in sales thru the Internet that avoids being subjected to sales tax in a city of 78,000. Multiply it by a state of 39.5 million people and you may have your answer as to why the state doesn’t seem to be able to stay on top of things.
There are those that say such a universal tax will create an unfair burden on the small guy that would be forced to collect taxes in thousands upon thousands of jurisdictions that have different rates. And while there are programs that can handle such calculations, they say they cost too much at $3,000 a year.
No one is forcing them to sell in that many jurisdictions and if hundreds of thousands of small Internet based firms that aren’t collecting sales tax now were required to do so, the competition to sell them sales tax programs would send the cost of such applications plummeting.
And let’s be honest about the big guys such as Wayfair that can obviously afford to collect a multitude of different sales taxes across endless jurisdictions.
They want to position themselves as Amazon did by clobbering the competition with what is essentially the ability to undersell everyone else that charges sales tax by almost 10 percent.
The reason why Amazon has no objection to universal sales tax collection via Internet retail transactions has everything to do with its business strategy as much as the fact they now have a physical presence in most states. A younger Amazon even when they had a physical presence in a state where they were engaging in Internet commerce fought collecting sales tax. The reason was simple. They were selling a 10 percent savings advantage.
A few years back the Wall Street Journal surveyed the cost of items in New York City, Dallas and several other cities. Even though Internet concerns such as Amazon did not have the costs of brick and mortar stores, the survey showed the price difference for identical products in the various jurisdictions were amazingly close to the sales tax collected. Amazon could have elected to have even deeper price cuts and still have bigger profit margins than brick and mortar competitors but elected not to. Instead they pursued a pricing strategy that allowed building both market share and generating net income allowing them to bankroll inroads into dozens of fields of commerce.
No one likes paying or collecting taxes. That said it is the price we pay for things such as police and fire protection, sanitation and water systems, streets, schools, and such that we can’t provide individually but we can on a community basis.
A lot has changed since 1992 when the high court’s ruling of the law essentially created an opening for firms such as Wayfair to give their customers a free ride on part of their share of the cost of government while at the same time Wayfair profits from more business driven by the no sales tax advantage they enjoy.